Zero-rated consumers: DISCOs charge GST, WHT instead of special tariff

The power distribution companies (DISCOs) have charged general sales tax (GST) and withholding tax (WHT) on the basis of notified tariff instead of special tariff for zero-rated industrial consumers for the month of March.

The notified tariff for the industrial connections (B-3) comes around Rs17 per kWh with an additional burden of 17 percent GST and 5 percent WHT. But the industrial consumers were expecting charging of both GST and WHT on the basis of a special tariff of 7.5 cents (Rs7.5) per kWh.

Industrial consumers are of the view that they are facing an acute financial crunch and their businesses are in very bad shape because of the spread of COVID-19. "It is extremely difficult for us to pay the bills in adverse circumstances," they said and apprehended that another liquidity crisis is taking shape for them as the electricity bills are due to be paid next week.

It is worth noting that the economic coordination committee (ECC) of cabinet had approved a special tariff of 7.5 cents per kWh plus taxes under the special relief package announced by the prime minister of Pakistan which was notified by the power division on 27th March, 2020. A copy of the notification is available with Business Recorder.

When contacted, Bashir Ahmed, Commercial Services Director (CSD) of Lahore Electric Supply Company, said both the GST and WHT have been charged on the direction of power division. He said the industry has already received a big relief with the removal of all types of surcharges and adjustments since January 1, 2019. "We had issued zero bills to the industry last month which is a big relief," he added.

Sources from the Pakistan Electric Power Company (PEPCO) said the industry consumers should understand that the cost difference of the notified tariff against the special tariff is being subsidized by the federal government.

In other words, they said, DISCOs are charging the full amount of the notified tariff and the industry is being compensated by the federal government. Furthermore, the industry can claim a refund of GST while the WHT is also adjustable; therefore, the industrial consumers would not have to take any additional burden.

They pointed out that only the ECC can reverse the decision. They said, the issue of GST and WHT on gas bills is already pending with the ECC. It may be noted that the federal government is taking special steps to stabilize the productivity of industrial consumers in the larger interest of their labour force, as the State Bank of Pakistan has not only offered soft loans for payment of wages but also reduced the discount rate to single-digit this week.